Correlation Between Harel Index and KSM Mutual

Can any of the company-specific risk be diversified away by investing in both Harel Index and KSM Mutual at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Harel Index and KSM Mutual into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Harel Index Funds and KSM Mutual Funds, you can compare the effects of market volatilities on Harel Index and KSM Mutual and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Harel Index with a short position of KSM Mutual. Check out your portfolio center. Please also check ongoing floating volatility patterns of Harel Index and KSM Mutual.

Diversification Opportunities for Harel Index and KSM Mutual

0.82

Correlation Coefficient

Harel Index  KSM Mutual

Very poor diversification

The 3 months correlation between Harel and KSM is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Harel Index Funds and KSM Mutual Funds in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KSM Mutual Funds and Harel Index is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Harel Index Funds are associated (or correlated) with KSM Mutual. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KSM Mutual Funds has no effect on the direction of Harel Index i.e., Harel Index and KSM Mutual go up and down completely randomly.

Pair Corralation between Harel Index and KSM Mutual

Assuming the 90 days trading horizon Harel Index is expected to generate 2.81 times less return on investment than KSM Mutual. In addition to that, Harel Index is 1.31 times more volatile than KSM Mutual Funds. It trades about 0.04 of its total potential returns per unit of risk. KSM Mutual Funds is currently generating about 0.16 per unit of volatility. If you would invest  1,703,000  in KSM Mutual Funds on September 15, 2024 and sell it today you would earn a total of  98,000  from holding KSM Mutual Funds or generate 5.75% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	97.87%
Values	Daily Returns

Harel Index Funds  vs.  KSM Mutual Funds

Harel Index Funds

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Harel Index Funds are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Harel Index is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

KSM Mutual Funds

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in KSM Mutual Funds are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical and fundamental indicators, KSM Mutual may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Harel Index and KSM Mutual

The main advantage of trading using opposite Harel Index and KSM Mutual positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Harel Index position performs unexpectedly, KSM Mutual can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in KSM Mutual will offset losses from the drop in KSM Mutual's long position.

The idea behind Harel Index Funds and KSM Mutual Funds pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Equity Valuation module to check real value of public entities based on technical and fundamental data.